Equities Government bonds Corporate bonds & other. Overweight

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1 Investment Monthly 01 March 2017 For Professional Client and Institutional Investor Use Only Equity rally implies a more selective approach Key takeaways We have downgraded our position on global equities to neutral from overweight, and we continue to be underweight developed market (DM) government bonds Global equities had another positive month in February, boosted by robust global macro data, upbeat corporate earnings and continuing expectations of a US fiscal package US activity is consistent with the Federal Reserve s projection of three rate hikes in 2017, although disappointment over fiscal stimulus or wage growth could temper this view Eurozone economic momentum is accelerating, but subdued core inflation and high political risks suggest the European Central Bank is likely to keep policy on hold in the near term Chinese policymakers continue to focus on maintaining stable growth whilst strengthening regulation in order to contain risks around financial leverage and asset bubbles For emerging market (EM) assets, the nature of the view has changed. The investment case is less about anomalous equity valuation and more about macro and price momentum, as well as cheap currencies We advocate a more neutral stance on global equities Following recent increases in global equity prices, and upward moves in government bond yields, implied equity premia have compressed. This limits the ability for the market to absorb bad news at a time of high political risks, including uncertainties around the potential form and timing of US fiscal stimulus. Therefore, we have downgraded our global equity view to neutral from overweight. Given the particularly poor premium now on offer in the UK (amid weakening domestic economic prospects), we have also downgraded our UK equities view, to underweight from neutral. We maintain our relative preference for European and Japanese equities that offer a better carry opportunity. We also remain overweight on EM assets, although a diminished valuation case justifies a selective approach. For DM government bonds, prospective returns still look low relative to competing asset classes and the prevailing macro environment is still bond-unfriendly; we remain underweight this asset class. However, investors seem to be pricing a significant level of US stimulus and the maintenance of positive macro momentum. With this abrupt shift in perceptions of bond risk, we think there is a strong diversification case for owning Treasuries as insurance against a worsening global growth picture, should this happen. Equities Government bonds Corporate bonds & other Asset class View View Movement Asset class View Global Global Underweight View Movement Asset class View Global investment grade (IG) View Movement US Underweight US Underweight USD IG UK Underweight UK Underweight Eurozone Overweight Eurozone Underweight EUR and GBP IG Global high-yield Japan Overweight Japan Underweight Gold Emerging Markets (EM) Asia ex Japan Overweight Emerging Markets Overweight Other commodities Overweight Real estate CEE & Latam This commentary has been produced by HSBC Global Asset Management to provide a high level overview of the recent economic and financial market environment, and is for information purposes only. The views expressed were held at the time of preparation; are subject to change without notice and may not reflect the views expressed in other HSBC Group communications or strategies. This marketing communication does not constitute investment advice or a recommendation to any reader of this content to buy or sell investments nor should it be regarded as investment research. The content has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. You should be aware that the value of any investment can go down as well as up and investors may not get back the amount originally invested. Furthermore, any investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in established markets. Any performance information shown refers to the past and should not be seen as an indication of future returns. You should always consider seeking professional advice when thinking about undertaking any form of investment.

2 Long-term asset class positioning (>12 months) Basis of Views and Definitions of Long term Asset class positioning tables Views are based on regional HSBC Global Asset Management Asset Allocation meetings held throughout February 2017, HSBC Global Asset Management s long-term expected return forecasts which were generated as at 31 January 2017, our portfolio optimisation process and actual portfolio positions. Icons: View on this asset class has been upgraded No change View on this asset class has been downgraded Underweight, overweight and neutral classifications are the high-level asset allocations tilts applied in diversified, typically multi-asset portfolios, which reflect a combination of our long-term valuation signals, our shorter-term cyclical views and actual positioning in portfolios. The views are expressed with reference to global portfolios. However, individual portfolio positions may vary according to mandate, benchmark, risk profile and the availability and riskiness of individual asset classes in different regions. Overweight implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks, HSBC Global Asset Management has (or would have) a positive tilt towards the asset class. Underweight implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks, HSBC Global Asset Management has (or would) have a negative tilt towards the asset class. implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks HSBC Global Asset Management has (or would have) neither a particularly negative or positive tilt towards the asset class For global investment-grade corporate bonds, the underweight, overweight and neutral categories for the asset class at the aggregate level are also based on high-level asset allocation considerations applied in diversified, typically multi-asset portfolios. However, USD investment-grade corporate bonds and EUR and GBP investment-grade corporate bonds are determined relative to the global investment-grade corporate bond universe. Equities Asset class View Movement Rationale Global Rationale of view change: Recent increases in global equity prices, combined with sharp downward price moves in the government bond market, have compressed implied equity premia. This limits the ability of the market to absorb bad news at a time of elevated political risks. Positive factors: Global economic growth momentum remains solid, driving global equity markets to deliver positive returns over the long term. Overall, support from accommodative monetary policy and an increased willingness for looser fiscal policy will, in the medium and longer term, likely outweigh any headwinds from more modest Chinese growth, US interest-rate increases and political uncertainty in many regions. Risks to consider: Episodic volatility may be triggered by concerns surrounding Chinese growth, uncertainty around US economic policy under a Trump administration (with the possible introduction of protectionist trade measures), a potentially more rapid than expected Fed tightening cycle, coupled with rising political risks (especially in Europe). A notable and persistent deterioration of the global economic outlook could also dampen our view. US Underweight Rationale of underweight views: Relatively high current valuations lead to an implied risk premium that is lower than in other developed markets. The policy outlook under a Trump administration remains highly uncertain. Positive factors to consider: Corporate tax reform, looser regulation and fiscal stimulus under a Trump administration present an upside risk to earnings. UK Underweight Rationale of view change: The prospective reward to bearing equity risk in the UK has sharply declined. Although the macroeconomic backdrop remains resilient following last June s Brexit vote, the economy faces a number of challenges, including negotiating Brexit. Overall, we doubt investors are being compensated enough for the risks. Positive factors: The UK economy has been far more resilient following June s Brexit vote than originally anticipated. Meanwhile, any further sterling weakness may support UK equities going forward given their relatively high dependence on foreign earnings. Eurozone Overweight Rationale of overweight views: We favour Eurozone equities due to their higher implied risk premia and scope for better earnings news given the region s earlier point in the activity cycle. Furthermore, the monetary backdrop remains supportive, with the ECB s Asset Purchase programme (APP) likely to be extended beyond the current December 2017 deadline. Risks to consider: Rising euroscepticism raises concerns over the European Union s future, potentially weighing on regional confidence and hitting growth prospects. Slower UK GDP growth may also hit Eurozone exports to a significant trading partner. Meanwhile, ECB monetary policy may be less accommodative than expected. Finally, further political uncertainty lies ahead in the form of the Dutch, French, German and (likely) Italian elections in /03/2017 Investment Monthly 2

3 Asset class View Movement Rationale Japan Overweight Rationale of overweight views: Relative valuations and risk premia are attractive, in our view, whilst the Bank of Japan s (BoJ) extremely loose monetary policy and the government s recent fiscal stimulus package may boost earnings. Large corporate cash reserves mean Japanese firms have scope to boost dividends or engage in stock repurchases. Risks to consider: Earnings momentum has slowed recently amid external headwinds and sluggish domestic fundamentals. The outlook for the yen remains uncertain a key risk for export-sensitive Japanese stocks. Emerging Markets (EM) Overweight Rationale of overweight views: EM equities remain attractive for western-based investors (USD, GBP or EUR based) given our expectation of longer-term currency appreciation. However, we continue to be selective, focussing on countries with strong underlying macro fundamentals, and which could be shielded from protectionist trade policies. Risks to consider: There could be some near-term volatility as worries persist around the uncertain path for future Fed tightening, the potential for increased trade protectionism, the rate of economic transition in China, and the robustness of the global economy as a whole. Geopolitical uncertainty also pose risks in certain markets. Asia ex Japan Overweight Rationale of overweight views: A combination of higher nominal growth, lower real interest rates, and a recovery in margins support earnings prospects. Return on equity is bottoming out amid a modest capex recovery. Resilient domestic demand, structural reforms and shareholderfriendly policies are also a positive for some markets. Risks to consider: US president Trump introduces the risk of protectionist policies. Another key risk is a more aggressive Fed hiking cycle and rising US/global yields, putting pressure on Asian FX and compounding capital outflows. Other risks include global/regional political events; commodity-price volatility; and renewed concerns about China s growth and financial risks. CEE & Latam Positive factors: Longer term, we anticipate positive growth differentials with Developed Markets to be maintained, whilst Brazil s status as a relatively closed economy offers some insulation from a potential increase in global protectionism. Other countries, such as Poland, have low levels of US dollar-denominated debt. Risks to consider: Geopolitical tensions are also high and unpredictable, whilst domestic political and macroeconomic fundamentals remain poor in many countries, such as Brazil. Meanwhile, Mexico would be particularly vulnerable to a Hard-Trump trade policy. Government bonds Asset class View Movement Rationale Global Underweight Rationale of underweight views: Despite the recent government bond selloff, prospective returns still look low relative to competing asset classes. In a bond-unfriendly environment (stronger global activity, the prospect of fiscal easing, and rising headline inflation in many economies), global bond yields could move higher still. Positive factors to consider: Government bonds still provide diversification benefits and reduce volatility within multi-asset portfolios. Meanwhile, secular stagnation forces are powerful (ageing populations, low productivity and investment), and the global pool of safety assets is limited. Therefore, the normalisation of bond yields could take several years. US Underweight Rationale of underweight views: The US labour market is at (or close to) full employment so underlying inflationary pressures are likely to build, especially with the prospect of US fiscal stimulus (which also boosts treasury issuance). In addition, prospective returns for US Treasuries still look low relative to competing asset classes and we maintain a structural underweight. Positive factors to consider: Investors seem to be pricing a significant level of US stimulus and the maintenance of positive macro momentum. We think there is a strong diversification case for owning Treasuries as insurance in case of a worsening global growth picture. UK Underweight Rationale of underweight views: Prospective UK gilt returns remain very low. Although there is still a high likelihood the UK economy will slow in the coming quarters, the compression of yields is likely to be partially offset by higher inflation following the fall in sterling. Positive factors to consider: Amid downside risks to growth, UK monetary policy is likely to stay highly accommodative for a longer period. Eurozone Underweight Rationale of underweight views: Similarly, core European bonds are overvalued, in our view. A key risk is the likelihood of further tapering of the ECB APP after December Positive factors to consider: The APP may provide near-term support. Meanwhile, core inflationary pressures and long-term inflation expectations in the region remain subdued, which should keep accommodative monetary policy in place for an extended period of time. 01/03/2017 Investment Monthly 3

4 Asset class View Movement Rationale Japan Underweight Rationale of underweight views: Japanese government bonds are overvalued, in our view, whilst the BoJ s commitment to peg 10-year yields close to zero could be re-evaluated. Given the high level of JGB purchases already made, other asset class purchases may be explored. Positive factors to consider: The Yield Curve Control framework will limit volatility and reduce the risk of higher yields in the near-term. Meanwhile, BoJ Governor Kuroda has indicated that cutting policy rates could play a central role in future policy decisions. Emerging markets Overweight Rationale of overweight views: The yield available on EM sovereign bonds makes them attractive relative to DM government debt, in our view. Furthermore, our estimate of the sustainable return on EM currencies reinforces our choice to hold this position unhedged. Risks to consider: Spreads in the EM debt universe are at risk of widening as US policy tightens. The required risk premium has also increased following the election of Trump. Bonds from EM economies with significant external financing needs are particularly vulnerable. Corporate bonds Asset class View Movement Rationale Global investment grade (IG) Positive factors: Corporate balance sheets remain in good shape and default rates are low. Furthermore, although credit spreads have narrowed significantly since early 2016, expected returns continue to look attractive on a relative basis. Risks to consider: Valuations do not appear anomalously cheap, and we retain a neutral positioning, particularly given the risk of tighter than expected US monetary policy. USD investment grade Positive factors: US investment grade debt looks more attractive relative to European credit. Carefully-selected US credit may outperform. Risks to consider: Lower relative valuations for USD-denominated credit is offset in the nearer term by the risk of a more aggressive pace of Fed tightening. The US credit cycle is more mature than that in Europe which remains nascent. EUR and GBP investment grade Positive factors: The ECB and BoE s corporate bond-buying programmes remain supportive. Meanwhile, in the Eurozone, the latest survey data suggests a gradual improvement in credit conditions, and default rates remain low. Valuations are still around neutral levels. Risks to consider: European and UK credits are vulnerable to a winding down of ECB and BoE corporate bond buying programmes. Stripping out currency effects, GBP-denominated credit for UK-focused names could deteriorate if the UK economy slows. Global highyield Positive factors: Defaults remain comparatively low and are likely to be contained to commodity-related sectors. Risks to consider: As with IG, high-yield credit could be volatile amid Fed policy tightening. Valuations are in fair value territory, leaving a thin margin of safety. Other Asset class View Movement Rationale Gold Positive factors: Fed hikes are likely to remain gradual, limiting the opportunity-cost of holding the non-yield generating asset. Rising inflationary pressures could boost inflation, hedging demand, whilst high political risks/uncertainty could also support the yellow metal. Risks to consider: A stronger-than-expected Fed hiking cycle may push the USD higher. Other commodities Positive factors: With oil demand growth remaining robust there is scope for the market to continue to rebalance, particularly following OPEC s November output cut deal. Risks to consider: Oil markets could remain oversupplied if demand growth slows, US production remains resilient, and OPEC cuts fail to be successfully implemented. Industrial metals remain exposed to the pace of China s economic rebalancing and global growth. Real estate Positive factors: Over the last six months, real-estate equity performance has lagged general equities, largely on the expectation of higher US interest rates. We believe the market has focused too heavily on real-estate equities as a bond proxy. Based on our estimates of future dividend growth, we believe global real-estate equities are priced to deliver attractive long-run returns relative to developed-market government bonds. Risks to consider: Rising interest rates could continue to impact listed real estate negatively in the short term. The UK's decision to leave the EU has reduced rental growth prospects, especially in central London, and increased uncertainty around future occupier demand. 01/03/2017 Investment Monthly 4

5 Equity rally implies a more selective approach Positive global macro data and earnings push global equities higher; 10-year Treasuries gain on US policy uncertainty Global equities had another positive month in February, boosted by robust global macro data, continuing expectations of a US fiscal package, and generally upbeat corporate earnings. The MSCI AC World index rose 2.8%. Within developed markets, US equities outperformed, with the S&P 500 reaching fresh record highs during the month, and finishing 3.7% higher. Japanese indices performed less well, with the Nikkei up 0.4% as telecom stocks dragged on the index amid disappointing earnings results in the sector. Meanwhile, European stocks also rose, although high political risk weighed on sentiment, particularly around the outcome of the upcoming French presidential elections. Within emerging markets, the MSCI India and China saw solid gains, although the MSCI Russia fell sharply (-8.5%) on signs of a more hawkish US foreign-policy stance towards the country. Finally, 10-year US Treasuries rose, supported by a lack of clarity around US tax reform, although policy-sensitive 2-year bonds fell on rising expectations of a March Fed rate hike. In Europe, regional political risks saw core bonds outperform, with 2-year German bund yields hitting fresh record lows (all data above as of close of 28 February in local currency, price return, month-to-date terms). US activity remains consistent with the Fed s expectation of three rate hikes in 2017 Recent US data releases continue to point to robust economic strength. January s nonfarm payrolls release showed 237,000 private sector jobs created, the strongest since July; however, wage growth (2.5% year-on-year) remains subdued. Positively, strong consumer sentiment surveys signal robust consumer spending, with retail sales data for January surprising to the upside for the first time in three months. Overall, US activity remains consistent with the Fed s expectation of three rate hikes in However, disappointment with the new administration s mooted fiscal stimulus package or subdued wage growth could temper this view. Eurozone data releases provide further evidence of a strong cyclical upturn in the region Eurozone data releases during February remained upbeat, with the preliminary PMIs for February providing further evidence of a strong cyclical upturn in the region. The composite indicator rose by 1.6pts to 56.0, its highest level since April The bulk of the increase was driven by services, with the continued strengthening of the Eurozone labour market supporting activity. Meanwhile, although gains in the manufacturing index were more muted, Markit cited that rising demand and the weaker euro continues to support the sector. The PMIs also showed a firming of forward-looking indicators, which suggests the potential for a further pickup in momentum over the coming months, and points to a firmer Q1 Eurozone GDP print, following 0.4% quarter-on-quarter (qoq) growth in Q4. However, core inflationary pressures remain subdued, whilst political uncertainty is high. This suggests the European Central Bank is likely to maintain its accommodative policy stance in the near term. Chinese economy maintained solid momentum in early 2017; Japan continues to register above-potential growth In China, policymakers continue to focus on maintaining stable growth whilst strengthening regulation in order to contain risks around financial leverage, asset bubbles and shadow banking activity. Economic activity maintained solid momentum in early 2017, driven by a recovery in exports and manufacturing and a rebound in the mining and metals industries, while inflation picked up further on supply-side cost pressures. Given the likelihood of a fading credit impulse and softer property investment, we expect growth to moderate this year, but fiscal policy support should remain intact. Japan s GDP grew by 1.0% qoq annualised in Q4, the fourth consecutive quarter of above-potential growth, reinforcing the Bank of Japan s (BoJ) expectation of gradually receding deflationary forces. However, private consumption, which represents 57% of GDP, remained flat, at the same level as in Q1 2013, just before the BoJ launched its quantitative easing programme. The main hurdle in this respect remains a lack of traction in real wage growth, despite growing labour-market tightness. Emerging market assets remain attractively priced, but selection is critical For emerging market (EM) assets, there remain three key post-trump drivers of risk: (i) the prospect of tighter financial conditions; (ii) a higher likelihood of US protectionism; and (iii) increased geopolitical uncertainty. Overall, the required EM risk premium has increased but there are selective opportunities. Our firm preference is for markets which are comparatively well shielded from protectionism, and possess a high carry as well as undervalued currencies poised for medium-term appreciation. Broadly speaking, EM equities are supported by currencies, which look cheap. Recent strong price/macro momentum is also a positive, whilst valuation opportunities exist in some markets (Korea, Russia, Poland and Turkey). EM local-currency debt has not rallied as strongly as equities year-to-date, and continues to look very attractive on a relative basis. In terms of recent economic developments, Brazilian data releases disappointed slightly in February, with retail sales and PMI prints surprising to the downside. This soft patch in economic momentum, combined with a larger than expected decline in inflation, saw the Central Bank of Brazil cut the Selic rate by 75bps for the second straight month at its February meeting. Mexico s February data releases showed a worsening growth profile, with a particularly sharp drop in consumer confidence. Despite having raised rates by 250bps over the past year, the Bank of Mexico will likely maintain a hawkish bias due to continued inflationary pressures. Elsewhere, the Reserve Bank of India (RBI) kept policy on hold at its February meeting, but changed its stance to neutral from accommodative, focusing on lowering inflation towards the medium-term target of 4%. We move to neutral on global equities following the recent compression of risk premia Recent increases in global equity prices, combined with sharp downward price moves in the government bond market, have compressed implied equity premia. This limits the ability for the market to absorb bad news at a time of high political risks. The premium looks especially poor in the US, Canada, and the UK. Therefore, we have downgraded our position on global equities to neutral, although we maintain our relative preference for European and Japanese equities which offer a better carry opportunity. For DM government bonds, prospective returns still look low relative to competing asset classes and the prevailing macro environment is bond-unfriendly, so we remain underweight in this asset class. However, following the recent abrupt shift in perceptions of bond risk, we think there is a strong diversification case for owning Treasuries as insurance against a worsening global growth picture, should this happen. 01/03/2017 Investment Monthly 5

6 Global Strategic Asset Allocations Global Strategic Asset Allocations (as at 31 January 2017) January saw a host of upbeat global economic activity data lift global equities higher, whilst continued expectations of Trump-led fiscal stimulus and deregulation also supported sentiment. The implied premium in global equities has compressed further relative to global bonds, and we now move to a neutral positioning in this asset class. The premium looks especially poor in the US, Canada, and the UK and, on a relative basis, we prefer the carry opportunity in Japan and Europe. In the credit space, we continue to advocate a neutral stance for both investment-grade and high-yield bonds as valuations remain in fair value territory. US investment-grade credit also continues to look more attractive than European credit. Finally, US Treasuries were little changed in January, but European equivalents fell amid higher inflation expectations and ahead of a number of political risk events this year. Overall, prospective returns still look low and we believe we are not being rewarded for taking duration risk. In the current bond-unfriendly environment (stronger global activity, the prospect of fiscal easing, and rising headline inflation) we maintain a structural underweight in DM government bonds. Within the allocations of our global multi-asset model portfolios, we continue to remain underweight DM government bonds, but this is only significantly visible within the model portfolio for Risk Profile 2, where the lower volatility target prevents too high an allocation to global equities. Risk Profile 2 Global Multi-Asset Model Portfolio Asset Class Current Model Portfolio Reference SAA Portfolio Tilt (January 2017) Portfolio Tilt Change Global Equities 22.0% 21.0% 1.0% 0.0% Global Government Bonds 12.5% 17.0% -4.5% 0.0% DM Government Bonds 6.0% 12.0% -6.0% 0.0% EM Government Bonds 6.5% 5.0% 1.5% 0.0% Global Corporate Bonds 58.0% 56.0% 2.0% 0.0% Global Investment Grade 42.5% 41.0% 1.5% 0.0% Global High Yield 11.5% 10.0% 1.5% 0.0% EM Debt (Hard Currency) 4.0% 5.0% -1.0% 0.0% Global Real Estate 5.0% 5.0% 0.0% 0.0% Cash 2.5% 1.0% 1.5% 0.0% Total 100.0% 100.0% 0.0% 0.0% Target Volatility 5-8% Risk Profile 3 Global Multi-Asset Model Portfolio Asset Class Current Model Portfolio Reference SAA Portfolio Tilt (January 2017) Portfolio Tilt Change Global Equities 48.0% 47.0% 1.0% 0.0% Global Government Bonds 9.5% 10.0% -0.5% 0.0% DM Government Bonds 3.0% 5.0% -2.0% 0.0% EM Government Bonds 6.5% 5.0% 1.5% 0.0% Global Corporate Bonds 36.0% 37.0% -1.0% 0.0% Global Investment Grade 20.5% 22.0% -1.5% 0.0% Global High Yield 11.5% 10.0% 1.5% 0.0% EM Debt (Hard Currency) 4.0% 5.0% -1.0% 0.0% Global Real Estate 5.0% 5.0% 0.0% 0.0% Cash 1.5% 1.0% 0.5% 0.0% Total 100.0% 100.0% 0.0% 0.0% Target Volatility 8-11% Source: HSBC Global Asset Management Past performance is not an indication of future returns. 01/03/2017 Investment Monthly 6

7 Risk Profile 4 Global Multi-Asset Model Portfolio Asset Class Current Model Portfolio Reference SAA Portfolio Tilt (January 2017) Portfolio Tilt Change Global Equities 71.5% 70.5% 1.0% 0.0% Global Government Bonds 6.5% 5.0% 1.5% 0.0% DM Government Bonds 0.0% 0.0% 0.0% 0.0% EM Government Bonds 6.5% 5.0% 1.5% 0.0% Global Corporate Bonds 16.0% 18.5% -2.5% 0.0% Global Investment Grade 1.0% 3.5% -2.5% 0.0% Global High Yield 11.0% 10.0% 1.0% 0.0% EM Debt (Hard Currency) 4.0% 5.0% -1.0% 0.0% Global Real Estate 5.0% 5.0% 0.0% 0.0% Cash 1.0% 1.0% 0.0% 0.0% Total 100.0% 100.0% 0.0% 0.0% Target Volatility 11-14% The above Current Portfolio is based on regional HSBC Global Asset Management Asset Allocation meetings held throughout February The SAA Portfolio is the result of HSBC Global Asset Management s portfolio optimisation process. These model portfolios are expressed in USD. Key Terms Strategic Asset Allocation Portfolio: Within AMG s multi-asset investment process, the SAA refers to the Strategic Asset Allocations, which are generated through optimising long-term estimates of both expected return and covariance. These form the portfolios reference allocation for each risk level. Current Portfolio: The Current Portfolio represents the portfolio s current target exposure. This reflects any active positions currently held in the portfolio (i.e. over/under weight positions relative to the SAA). Portfolio Tilt: The difference between the Current Portfolio and SAA Portfolio allocations. Positive values reflect overweight exposure i.e. where a positive outlook on a particular asset class is currently held. Conversely, negative values reflect underweight positions i.e. where the team currently maintain a more cautious outlook. Portfolio Tilt Change: The change in Portfolio Tilts from the previous Multi-Asset Strategy meeting. Risk Profiles Each of the three portfolios outlined above match different customer risk profiles, as defined by their target long-term volatility bands: Risk Profile 2 has a long-term target volatility of 5-8%. This portfolio typically has a substantial allocation to fixed income investments and some allocations to growth-oriented investments such as equities. Risk Profile 3 has a long-term target volatility of 8-11%. This portfolio typically has allocations to both fixed income investments and growth-oriented investments such as equities. Risk Profile 4 has a long-term target volatility of 11-14%. This portfolio typically has a high allocation to growth-oriented investments with higher risk levels. Note: The Strategic Asset Allocations detailed above may sometimes appear to differ from the Long-term Asset Class positioning table on pages 2 and 3 primarily due to portfolio constraints which include achieving portfolio volatility within the target long-term volatility bands and minimum and maximum asset class weights. The above Current Portfolio allocations are based on HSBC Global Asset Management s current outlook and portfolio positioning. These positions are revisited on a monthly basis. The allocations are for illustrative purposes and are designed to be broadly representative of our current multi-asset positioning. Actual portfolio positioning may differ by product or client mandate due to manager discretion, local requirements, portfolio constraints and other additional factors. The Current Portfolio allocations do not consider the investment objectives, risk tolerance or financial circumstances of any particular client. They should not be relied upon as investment advice, research, or a recommendation by HSBC Global Asset Management. Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns. The reference index for Equities is the MSCI All Country World Index (ACWI), which includes both developed and emerging market equities. The reference index for Real Estate is the FTSE EPRA/NAREIT Developed Index, which is designed to track the performance of listed real estate companies and Real Estate Investment Trusts (REITs). Source: HSBC Global Asset Management Past performance is not an indication of future returns. 01/03/2017 Investment Monthly 7

8 Market Data MTD 3M 1-year YTD 52-week 52-week Fwd Close Change Change Change Change High Low P/E Equity Indices (% ) (% ) (% ) (% ) (X) World MSCI AC World Index (USD) North America US Dow Jones Industrial Average 20, ,851 16, US S&P 500 Index 2, ,372 1, US NASDAQ Composite Index 5, ,868 4, Canada S&P/TSX Composite Index 15, ,943 12, Europe MSCI AC Europe (USD) Euro STOXX 50 Index 3, ,356 2, UK FTSE 100 Index 7, ,354 5, Germany DAX Index* 11, ,031 9, France CAC-40 Index 4, ,932 3, Spain IBEX 35 Index 9, ,647 7, Asia Pacific MSCI AC Asia Pacific ex Japan (USD) Japan Nikkei-225 Stock Average 19, ,615 14, Australian Stock Exchange 200 5, ,833 4, Hong Kong Hang Seng Index 23, ,364 19, Shanghai Stock Exchange Composite Index 3, ,301 2, Hang Seng China Enterprises Index 10, ,593 7, Taiwan TAIEX Index 9, ,870 8, Korea KOSPI Index 2, ,109 1, India SENSEX 30 Index 28, ,077 23, Indonesia Jakarta Stock Price Index 5, ,492 4, Malaysia Kuala Lumpur Composite Index 1, ,729 1, Philippines Stock Exchange PSE Index 7, ,118 6, Singapore FTSE Straits Times Index 3, ,139 2, Thailand SET Index 1, ,601 1, Latam Argentina Merval Index 19, ,235 11, Brazil Bovespa Index* 66, ,488 41, Chile IPSA Index 4, ,385 3, Colombia COLCAP Index 1, ,419 1, Mexico Index 46, ,956 43, EEMEA Russia MICEX Index 2, ,294 1, South Africa JSE Index 51, ,704 48, Turkey ISE 100 Index* 87, ,583 70, *Indices expressed as total returns. All others are price returns. 3-month YTD 1-year 3-year 5-year Change Change Change Change Change Equity Indices - Total Return (% ) (% ) (% ) (% ) (% ) Global equities US equities Europe equities Asia Pacific ex Japan equities Japan equities Latam equities Emerging Markets equities All total returns quoted in USD terms. Data sourced from MSCI AC World Total Return Index, MSCI USA Total Return Index, MSCI AC Europe Total Return Index, MSCI AC Asia Pacific ex Japan Total Return Index, MSCI Japan Total Return Index, MSCI Latam Total Return Index and MSCI Emerging Markets Total Return Index. Sources: Bloomberg, HSBC Global Asset Management. Data as at close of business 28 February Past performance is not an indication of future returns. 01/03/2017 Investment Monthly 8

9 Market Data (continued) MTD 3-month 1-year YTD Close Change Change Change Change Bond indices - Total Return (% ) (% ) (% ) (% ) BarCap GlobalAgg (Hedged in USD) JPM EMBI Global BarCap US Corporate Index (USD) 2, BarCap Euro Corporate Index (Eur) BarCap Global High Yield (USD) Markit iboxx Asia ex-japan Bond Index (USD) Markit iboxx Asia ex-japan High-Yield Bond Index (USD) Total return includes income from dividends and interest as well as appreciation or depreciation in the price of an asset over the given period End of 3-months 1-year Year End Bonds Close last mth. Ago Ago 2016 US Treasury yields (%) 3-Month Year Year Year Year Developed market 10-year bond yields (%) Japan UK Germany France Italy Spain End of 3- months 1-year Year End 52-week 52-week Currencies (vs USD) Latest last mth. Ago Ago 2016 High Low Developed markets EUR/USD GBP/USD CHF/USD CAD JPY AUD NZD Asia HKD CNY INR MYR KRW 1,130 1,161 1,169 1,237 1,206 1,236 1,090 TWD Latam BRL COP 2,926 2,923 3,074 3,293 3,002 3,247 2,817 MXN EEMEA RUB ZAR TRY Latest MTD 3-month 1-year YTD 52-week 52-week Change Change Change Change High Low Commodities (% ) (% ) (% ) (% ) Gold 1, ,375 1,121 Brent Oil WTI Crude Oil R/J CRB Futures Index LME Copper 5, ,204 4,484 Sources: Bloomberg, HSBC Global Asset Management. Data as at close of business 28 February Past performance is not an indication of future returns. 01/03/2017 Investment Monthly 9

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